Sink or swim: Brexit and expat pensions

Wouldn’t be great if amongst all the excitement and hype, British expats had some information that could actually be of use to them regarding the pending EU referendum?

There are many retired British expats in Europe; there are also a substantial number of Brits currently working in the EU. Unfortunately, there is a distinct lack of clarity as to how expatriates would be affected in the event of a Brexit vote on 23 June.

Impact of Brexit on UK state pensions

There is concern that UK state pensions may be frozen if Britain chooses to leave the EU. Under the existing system, the state pensions of retired Britons in Europe increase annually in line with either inflation or a figure of 2.5%; whichever is the highest. A ‘no’ vote would result in the existing bilateral agreements between the UK and countries in the European Economic Area (EEA) having to be renegotiated.

At present the flat-rate state pension is set at £155.65 per week. Failure to secure a suitable arrangement would mean that the reported 472,000 EU based British citizens aged 65 and over, who are currently in receipt of the state pension, would run the risk of losing up to £50,000 in pension increases over a 20-year period.

Government figures from 2015 show that there were circa 132,000 British recipients of UK state pensions resident in Ireland, with 109,000 in Spain and 61,000 in France. These expats could see their pension payments frozen whilst renegotiations take place. It is likely that the UK government would be able to negotiate protections for expat pensioners in the event of a Brexit. However, such negotiations are not straight-forward; they can be long and protracted. The uncertainty may have a negative impact on pensioners who rely on their benefits keeping in line with inflation. There are fears that should the British vote to leave the EU, that the current ‘trickle’ of expat pensioners returning from mainland Europe to the UK, may turn into a ‘flood’.

The situation is worse for British expats who have emigrated or retired further afield, to countries such as Canada, Australia, New Zealand and South Africa. Migrants to these places have had their state pension permanently frozen at the date they retired or when they arrived in that country. Details on which countries freeze British state pensions can be found here.

Who can vote on the referendum

One way to have more of a say in terms of what happens to your retirementwhen living abroadis to exercise your right to vote in the EU referendum. The existing laws state that only those British expats that have been resident abroad for less than 15 years are eligible to vote. They can either vote by post, by appointing someone to vote on their behalf or in person at their home polling station if they visit the UK on polling day. A number of expatriates who have been resident overseas for more than 15 years challenged the law in the British courts. They lost the case, with the judge ruling that the government was entitled to adopt a cut-off period “at which extended residence abroad might indicate a weakening of ties with the United Kingdom”. This has left many expats feeling disenfranchised; they argue that British citizenship should bring with it rights, obligations and a connection with the country that should endure.

Expat Pensions: Transfer Your SIPP Overseas

If you are concerned about the status of your UK state or expat pension, AXIS Strategy Consultants can offer you a range of professional advice. It is now possible to take your UK pension with you should you decide to retire abroad. In 2006 legislation was passed by HM Revenue and Customs to comply with an EU directive that pensions be free to move across Europe’s borders. UK pensions can now be transferred to a Qualifying Recognised Overseas Pension Schemeotherwise known as a QROPS.

About Des Cooney

Des Cooney is a renowned International Pensions expert with over 27 years experience in pension and wealth management. His main specialty is in the transfer of UK pensions to QROPS and International SIPPs.

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About AXIS

AXIS Consultants are a team of Overseas Pensions experts helping expats make the best investment decisions about their retirement.

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The contents of this website are for educational and information purposes only. No part of this website is to be considered as an offer, inducement or recommendation to invest. AXIS Strategy Consultants are a fully authorised “Courtiers d’Assurance” in France, reg. no. 08 044 720